Washington, D.C.: The World Bank on Wednesday raised India’s GDP growth forecast to 6.6 per cent for the current fiscal year, while cautioning that inflationary pressures may rise due to strong domestic demand, normalising food prices, and elevated energy costs. The revised projection, published in the April 2026 edition of its South Asia Economic Update, marks an increase from the earlier estimate of 6.3 per cent made in October. However, the report underlined that growth would still be lower than the 7.6 per cent estimated for FY26, reflecting emerging global and regional challenges, particularly those stemming from the West Asia conflict.
“Growth is projected to decelerate to 6.6 per cent in FY27, reflecting headwinds from the West Asia conflict. The impact of these is highly uncertain that other forecasters have revised down their growth projections to a range between 5.9 and 6.7 per cent,” the World Bank stated.
Earlier in the day, the Reserve Bank of India also revised its outlook, lowering India’s GDP growth forecast to 6.9 per cent for FY27. The central bank cited concerns over elevated commodity prices and supply chain disruptions linked to the ongoing West Asia crisis.
Inflation Risks and Demand Pressures
The World Bank report further noted that reductions in goods and services tax (GST) rates are expected to support consumer demand in the first half of FY27. However, it warned that persistently high global energy prices could exert upward pressure on inflation and constrain household disposable incomes. “Government consumption growth is expected to soften to offset higher subsidy outlays for cooking fuel and fertilisers,” the report said. It added that investment growth is also likely to moderate amid rising uncertainty and increasing input costs faced by businesses.
While India may benefit from improved market access to the United States and the European Union for its exports, the report observed that these gains could be offset by slower economic growth in major trading partners. At the regional level, growth in South Asia is projected to slow to 6.3 per cent in 2026, down from 7 per cent in 2025. The report attributed this moderation primarily to disruptions in global energy markets and noted that the region’s economic performance could be affected through multiple transmission channels. “Persistently high energy prices could further increase production costs, erode real incomes, tighten financial conditions, and worsen current account imbalances,” the World Bank cautioned. It also warned that a wave of global financial turbulence could spill over into South Asian economies and be amplified by domestic vulnerabilities, including high levels of nonperforming loans in some countries, elevated interest payment obligations, and stretched stock market valuations.
On the fiscal front, the report observed that while India’s fiscal deficit had been on a declining trajectory in recent years, this trend may stall or even reverse. This is largely due to increased subsidy outlays aimed at cushioning consumers from the full impact of rising prices, particularly in energy and essential commodities.
